The impact so far of Ontario’s FIT/green energy on electricity bills: 0.4 cents

I’m reposting a recent entry from the blog of Ontario’s Environmental Commissioner, Gord Miller, to put Ontario’s green energy strategy — largely, its feed-in-tariff program — in perspective. Conservative pundits, anti-wind groups and other angry birds in the province like to point out how green energy is hurting hard-working families, but this is far from the truth. Natural gas and nuclear contracts contribute more, and while Miller recognizes that over the next few years green energy costs will represent a larger portion, that’s not the case today or in the near future so all the scare-mongering is just a blatant attempt to mislead voters and steal votes. Here’s how Miller lays it out:

There has been much effort made in the media to lead the public to believe that their electricity bills have been spiralling due to the cost of subsidies to wind and solar initiatives of our energy conservation programs. The 80 cents/kilowatt hour (kWh) for solar is frequently cited as the greatest offender, even though that rate only applies to rooftop solar with a capacity of 10 kW or less. In total, such installations currently amount to just 34 MW out of the 37,000 MW of installed generation in the province. Not mentioned are the subsidies paid to our private natural gas generators, or those paid to Bruce Power, when the market price doesn’t meet their guaranteed price (which is almost all the time). The latter subsidies involve 70% of the global adjustment monies paid out, simply because they pay for the delivery of much more power. In fact, the Ontario Power Authority paid out $1.35 billion in 2010 to meet gas and nuclear power purchase agreements.

So how significant are the subsidies to renewable energy and the monies paid for conservation in a typical residential electricity bill anyway? To answer that we had better clarify what a typical electricity rate is per kilowatt hour delivered to your home. There has been much confusion about that as well.

A typical electrical bill consists of a charge per kWh of electricity used, plus a charge for transmission and distribution, plus a fixed fee to the utility, plus a regulatory charge, plus a debt retirement charge, plus HST, less the 10% the Province has just given us in the clean energy benefit. It is a complicated system to be sure. To get an estimate of a representative rate, we looked at a typical home that heats with natural gas and uses 800 kWh of electricity per month, and we compared that to a similar house with electric heat that uses typically 2500 kWh of electricity per month (averaged over 12 months). Although the costs per month obviously varied ($105 vs. $303) the cost of electricity per kWh “all in” was the same, about 13 cents.

So how much of that is due to renewables and conservation? In 2010, the Ontario Power Authority paid electricity resource costs of $317 million for conservation programs, and $269 million for renewables. That is a lot of money – but you must realize that it is recovered over a total Ontario consumption in 2010 of 142 terawatt hours (that’s 142,000,000,000 kWh), which amounts to 0.4 cents per kWh (split roughly equally between conservation and renewable subsidies). So the cost of conservation and all the renewable subsidies in 2010 amounted to 0.4 cents of the 13 cents we paid for a kWh in our homes. A significant amount, perhaps, but hardly the bogeyman that it is so often made out to be.

In fairness, it must be acknowledged that this 0.4 cent amount will rise as more green energy comes on line in future years, but in 2010 that is what it was. During these times when we are publicly discussing a long-term electrical energy plan, I think it is important to be honest about the current cost of electricity.

Now, I think we need to start moving larger-scale wind and solar projects to a competitive bidding process to keep FIT costs from escalating too much, too quickly, but clearly the impact today doesn’t justify what public outcry there has been.

Well, this is not so – Mr. Miller was far more useful when he was pointing out how little of our emissions are from generation and noting the shortcomings of our government’s overall emissions reduction strategy due to this obsession, but specifically:
– the price of 13 cents must be urban and it must include the line-loss adjustment (just so your readers in other jurisdictions know in Ontario if you use 800kWh you are charged for around 864kWh – most jurisdictions would compute this at over 14 cents/kWh).
Regardless, about 2 cents of that would be the increase in delivery rates in the past couple of years, much of which is due to smart meter, and smart grid initiatives (graph of growth in Hydro One spending at http://tinyurl.com/46zsb3m). So let’s throw CDM in here too, and that’s already about a penny for nothing – as they have no idea what to do with the stuff we bought.
On the $/MWh, it takes some work to get to a number, but it can be done using the figures from http://www.ieso.ca/imoweb/b100/ga_archive.asp and subtracting the annual reporting figures of Bruce Power (some guesswork is required for 2010, but not much). It’s possible to estimate what the OPA GA adds to ‘other’ (which is the newer contracts primarily for wind, solar, and natural gas). Basically the GA amount for ‘other’ from 08-10, in $M, $353, $516 and $1,251. In that time the total value of the market increased about $650.
So the reason people perceive green energy as escalating their bills is because it is – the reason they see it as escalating them a lot is because double digit increases in consecutive years is a lot. And that reason is because the wind does nothing and the gas, as contracted by the OPA, is expensive.
Most of us aren’t against wind because we are NIMBYs – we are against it because it’s useless – and that is expensive.

Gord Miller should not have added the conservation costs with the renewable cost. The conservation program costs have resulted in savings for some families and businesses, and are therefore potentially no cost or in fact a savings. The renewable electricity cost that OPA paid must have the equivalent cost for non-renewable forms of power (including IESO time of day cost adjustments) subtracted before the cost of the renewable power can actually be determined. It needs a more detailed cost accounting before we start throwing out a number, I think the number is at least half and likely even less per kWh than the number Gord has presented. Wish I had the time to generate that number!

$48 is something, but the average household spends $1560 a year on power. $ 48 is roughly 3%. If the average Canadian household would save 10% of its consumption which would bring it in the range of a US household or even 30% to get closer to a German household or 50% which would get you closer to a Danish household… the Canadian could save $ 100 or $ 400 or $ 700 hundred dollars a year or $2 or $ 8 or $ 14 a week.
Excessive consumption is the issue for the household and the lever to save money – not the price of electricity.
Ingo

The cost of gas-powered electricity is also a “green” premium, since it’s being incurred to phase out the last of Ontario’s coal-fired stations — including those with LOW or even ZERO capacity factors and emissions!! Neither the environment nor public health will see any benefit from these expensive and doctrinaire replacements.

The fact that it takes much MORE gas-fired capacity than coal-fired capacity to back up the same intermittent source (e.g., the same wind farm) increases the green-cost component of the GA, and our bills.

Speaking the truth about the relationship between transmission and renewables is “playing devil’s advocate”, Tyler? Since when does the Devil like the truth?

Norm, I don’t know what kind of Kool-Aid you’re drinking but it has the side effect of making you an angry person.

Gas-powered electricity is NOT a green premium. Phasing out coal would require it whether we built a wind turbine or not. You are against nuclear, natural gas, renewables… so what’s your solution: Coal? What’s your answer, Norm? You’re full of criticism, but I haven’t heard a single positive or constructive word out of you or the climate-denier organization you represent.

Saying, “Neither the environment nor public health will see any benefit from these expensive and doctrinaire replacements” is a complete fabrication. Just saying it doesn’t make it true.

Norm Rubin said nothing that isn’t broadly known. Recent speeches by John Rowe and Jonathan Siegler demonstrate nobody is building anything now, because of depressed market prices primarily due to depressed consumption (right across North America) combined with low prices for natural gas, which is the generation source for incremental demand (which determines the price).
If there wasn’t a need for new generation, people would create one.
Into that environment entire the sharks playing the greens. INGAA is now strategizing the acquisition of subsidies for new generation because wind will require lots of back-up – and they say they’ll be the cleanest. The capacity factors INGAA estimates, noting its optimistic, is 15.6%.
That’s expensive.
Everybody who isn’t selling something can see Norm Rubin’s statement is true.

Scott, not sure how what you’re saying relates to — or supports — what Norm said. Norm equates natural gas with green supply. I’m saying he’s wrong. Norm, it seems, believes we shouldn’t be shutting down the coal plants. I take it you believe that as well. Fair enough. But that’s the policy, and the coal has to be replaced — at some point — with something. Natural gas. Nuclear. Renewables. Take your pick — what it is? Don’t tell me we should keep coal. Not an option. Tell me, knowing that’s the policy and for better or worse it’s set in stone, what we should replace coal with?

Don’t blame the green stuff if your problem is with the decision to shut down coal.

Thanks for asking – I thought it was desirable to replace coal with nothing. I’m pretty sure everybody is on the CDM bandwagon now.
Reality. The latest IESO forecasts is for peak demand of around 23500MW, with extreme demand possibly raising that to about 26000MW.
I do think it is foolish to replace that 2500MW of supply. I think a policy of not using coal is far more intelligent that a policy of eliminating all of it (ignoring the dirty little secret of Lennox).
To put that in perspective, in 2008 11 hours were above 23500MW, and in 2009 only 7. For the sake of half a day every year, building 2400MW of wind and another 1200MW of gas to back it up is not going to be a good allocation of resources. As Mr. Rubin implied, capacity factors could be kept to, or near, zero.
The other point on allocation of resources is CCGT compared to OCGT, The jurisdictions we compete with for industry are operating CCGT plants around 40%, and using OCGT for peaking. I believe we’ve only proposed OCGT for the Holland Marsh plant. I’m unconvinced OCGT new builds would be much cleaner than existing coal fitting with current emissions reduction technology.
I don’t know – so I have no reason to question the power workers union or Norm Rubin.
I do know, from EIA stats, that the 10 states with the most wind generation have a poorer performance on emissions reductions that the other 40 states.
You’d get a lot more reduction in emissions by getting NIMBY’s to stop putting stop signs up at 3-way intersections, or preventing the synchronization of traffic lights, than by railing against opponents of the unproven, over-hyped, IWT experiment.
Mr. Miller used to note things like that.

Tyler, I hope we can disagree on facts and policies without accusing each other of going mad, or even being emotionally wrought about them. Meanwhile, I defy you to re-read my post, then read yours, and conclude that I’m the angry one! 😉

I don’t know how you decided that the twice-postponed coal phaseout is permanent and not “green”, while the GEEA and FIT and micro-FIT are somehow less permanent (or more “green”). Can you explain the distinction? (BTW, I don’t claim that gas itself is green, but the decision to phase out all the coal — and replace it all with gas — is justified with the same “green” arguments as the over-payments for wind and PV, so I do see it as part of the same crude, anti-economical, and politically and economically unsustainable package.)

A rational policy to decrease CO2 emissions would never shut down any zero-capacity-factor coal-fired stations and replace them with zero-capacity-factor gas-fired stations — but that’s exactly what current policy will do. If you can attribute any real environmental benefit to that — as opposed to a symbolic benefit that’s only seen by people who don’t understand the environmental reality — please explain it to me. Explaining it here is fine. And while you’re at it, extend that explanation to the LOW-capacity-factor coal-fired stations that will be replaced with LOW-capacity-factor gas-fired stations, whose trivially lower CO2 emissions will never compensate for the CO2 emitted by the conversion itself.

I will await your attempt to justify the absurd, but unless your answer is shockingly persuasive and new, I’m standing by my “Neither the environment nor public health will see any benefit from these expensive and doctrinaire replacements”. Just saying it doesn’t make it true — agreed — but just calling it “a complete fabrication” doesn’t make it false, either.

The fact that it takes much more than 100MW of (OCGT) gas — and much more than the required coal-fired capacity — to backup 100MW of wind is somewhat complicated to explain, but the absence of benefits from outlawing and replacing ZERO-capacity-factor coal-fired stations is technically simple, so I’m sure you already “get” it, right?

BTW, neither nuclear nor any renewables (other than biomass, which seems to be extremely $$$) can replace coal. Wind eliminates some coal-fired emissions while there’s coal online, but not after it’s replaced with gas. (In fact, a wind-plus-gas system emits somewhat MORE CO2 than a wind-plus-coal system, though that is part of the story that takes some technical details to explain.)

We may have to “agree to disagree” about the benefits of a market-based electrical grid (with government restricting itself to a regulatory role, including internalizing enviro and health externalities) vs. one that’s centrally planned behind closed doors in secret meetings between industry and government officials, and then debated in Question Period and elections. But I don’t know why advocating the former type of system isn’t a “positive or constructive” suggestion. Does it have to be centrally-planned for you to see it? Do you feel the same way about the automobile market and the others, or is it still OK to let customers choose between competitors there?

I find it funny how we are comparing renewables today versus natural gas and nuclear today. That would be like saying in 1940 I spent only 5% of my income on gas for my car. Well in 1940 most people didnt have cars, gas was only 0.30$/L and the thirst for driving 50 miles per day to work was not present. Obvisouly this is not a fair comparison due to the time differences. Wait till renewables cover 50% of ON’s electricity load (we’ll see if that happens) and then see how much it counts for in a %/KWh, I bet it to be more than nuclear and natural gas ever will be.